Nashua client has questions about what happens to her revocable trust and creditors after she dies?

Revocable trusts are common estate planning tools in New Hampshire. The trust is established by someone known as a “grantor” (i.e. the person who transfers assets into the trust) and in most instances is also a beneficiary of the trust. When the grantor dies, the trust does not automatically terminate. There are steps that need to be followed in order to close out a trust after the grantor dies. Once all of the closing steps have been completed the trust can be closed out.  During the administration of the trust the trust still operates. 

The main benefit of a revocable trust is that after the grantor’s death the trust does not have to go through the probate process.  After death, a formerly revocable trust becomes irrevocable and the assets of the trust are distributed in accordance with the grantor’s directions. After the debts and obligations of the estate are settled, the assets are distributed to the beneficiaries. However, in order to do this, there are steps that must be taken.  A New Hampshire estate planning attorney can help you with these steps.

Successor Trustee

The duty to fulfill the terms of the trust (trust “administration” for short) are assumed by the successor trustee after the grantor’s death. This trustee has to deal with the beneficiaries and has obligations to them. The successor trustee will also have to deal with any creditors of the grantor and coordinate the preparation of any tax returns that are due.

Notifying the Creditors

Death does not make the deceased Grantor’s debt obligations disappear.  Creditors will expect to be paid back from the trust assets. Accordingly, creditors can be notified that the trust has become irrevocable and that the trustee is now responsible for the trust and intends to close it. Whether notice to creditors is required is also a matter of state law.  Many states, such as New Hampshire, have enacted laws which do provide some guidance on creditor notice provisions in the revocable trust context.  For example, a trustee may be required to publish notice of death in a newspaper or some other publication. A prudent trustee should consult with their estate planning attorney about the various creditor notice provisions and whether a creditor claim is time barred before making final trust distributions to the trust’s beneficiaries. Creditors generally have a limited period of time to file claims. However, if the creditors do have notice, in most states it will give them a shorter period in which to file a claim than they would otherwise have.

Settling and Negotiating Debts

The deceased may have owed money. As mentioned above, the creditors are able to access the trust’s assets for repayment. It is important to know that not all debts must be paid. Some debts do go away when the grantor dies. For example, student loan debts do not survive the death of the grantor. Other loans, such as credit card debt do continue to exist. The debts must be paid before the trust property is distributed to the beneficiaries. If not, both the trustee and the beneficiaries may be sued by the creditor for repayment of the debt. The trustee can either use liquid assets of the trust such as bank accounts to pay the debt or sell assets to raise funds. The beneficiaries may receive money or property usually only after all of the creditors have been paid. Another of these obligations and debts is income taxes, which must be paid out of the deceased’s assets. Some states have laws that require that estate taxes be paid before the beneficiaries can receive assets. The trustee must be careful about distributing assets before debts have been settled in order to avoid becoming personally liable.


The first things that must be done before distributing the assets is valuing them in order to know how to do the distribution. After the bills, expenses and creditors have been paid, the pool of assets with be known. Then, the trustee must follow the directions of the grantor in either selling or deciding what to do with the assets. After all property that must be sold is sold, there will be the group of assets that needs to be distributed. To the extent that the assets are liquid, checks will be issued to the beneficiaries. If the property is not sold, then it will be retitled to reflect the new ownership by the beneficiaries. Note that the trustee may be liable for any future expenses if new expenses arise after the assets of the trust are distributed so this final step may take some time.

If you’re interested in talking with the attorneys at Welts, White & Fontaine PC about estate planning, including wills and trusts, trust administration and probate matters please contact us by clicking here or by calling (603) 883-0797. Welts, White & Fontaine is one of Nashua’s largest, multi-practice law firms and serves the legal needs of both individuals and businesses in towns such as Amherst, Milford, Hudson, Brookline, Windham, Hollis, Merrimack, Litchfield, Bedford, Londonderry, Pelham, and, of course, Nashua.

Author: John Polgrean

This blog is intended for informational use only. The information contained herein should not be construed as offering legal advice or a legal opinion.

Welts, White & Fontaine, P.C.

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29 Factory Street Nashua, New Hampshire 03060
Telephone: (603) 883-0797 | FAX: (603) 883-8723 | [email protected]

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